Comparison of the Tax System Progressivity Over Time: Theory and Application with Mexican Data

Abdelkrim Araar () and Luis Huesca ()

Cahiers de recherche from CIRPEE

Abstract: Assessing the progressivity of a fiscal system is relevant to develop a global idea on the extent of redistribution. In this paper we assess the evolution of progressivity over time and how economic shocks and government fiscal policy affects its design. The social performance of fiscal redistributive mechanisms in Mexico has been receiving a growing interest from politicians and researchers. The aim of this paper is to assess the dynamics of progressivity of the fiscal system in Mexico and its effect on inequality and on polarization, and this during the period of 2002-2012. What distinguishes this work is the relevance of the adopted comparison approach of progressivity and where the common support of comparison is imposed. The results of this study confirm the effectiveness of the governmental redistributive mechanisms to decrease after-tax income inequality. Based on our estimates, we find a significant increase in the progressivity of the fiscal system over time, despite the high persistent levels of polarization and inequality in the country. Finally, we find that imposing the common support of comparison has a non-negligible impact on the level of progressivity.

Keywords: Fiscal Policy; Progressivity; Inequality; Polarization (search for similar items in EconPapers)
JEL-codes: D63 E62 I32 O12 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-mac and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:lacicr:1419

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